On 21 September 2024, the Chief Public Prosecutor of the Belgian Competition authority (“BCA”) publicly announced that in the BCA’s investigations into agreements concerning subsidies granted for the delivery of newspapers and magazines in Belgium the BCA will for the first time also be prosecuting physical persons. This statement follows two recent decisions punishing bid rigging practices, issued in July 2024, and the recent publication of the BCA’s 2023 report, in which it identified bid rigging as a priority for the coming years.
Understanding Bid Rigging
Bid rigging is a form of anti-competitive collusion in which competitors conspire to manipulate the outcome of a public procurement process. This practice undermines fair competition, and leads to inflated prices, lower quality of products/services and reduced innovation. Bid rigging can take various forms, but it always involves an agreement between competing companies to alter the competitive landscape in their favour, often to the detriment of the contracting authority and, ultimately, consumers and the tax payer.
The most common forms of bid rigging include:
- Cover Bidding (Complementary Bidding): One or more competitors submit intentionally high bids that are designed to lose, ensuring that a predetermined competitor wins the contract. This gives the appearance of competition while ensuring that a particular company wins the contract.
- Bid Suppression: One or more competitors agree to refrain from bidding or withdraw a submitted bid, allowing a designated company to win the contract unchallenged. This reduces the number of bids and makes the bidding process less competitive. The losing company/ies might even be compensated for withdrawing their bid by a payment or their involvement as a subcontractor.
- Bid Rotation: The colluding companies agree on the winning bidder. Over a series of contracts, each company has an opportunity to win a contract, ensuring that all parties benefit from the collusion over time. This is often organised by taking turns submitting the lowest bid, regardless of the actual cost or quality of the services offered.
- Market division: Competitors agree to divide markets among themselves, either geographically or by customer type, to reduce competition. Each competitor agrees not to bid or to submit losing bids in the others’ designated markets, ensuring that each can maintain control over their respective market segments.
Bid Rigging in Competition Law & Potential Penalties
Submitting concerted bids for public procurement contracts is prohibited under both EU And Belgian competition laws punishing agreements or concerted practices restricting competition, as well as under public procurement law rules. Infringing the Belgian and/or EU competition rules can be punished with administrative fines imposed by the Belgian and/or EU competition authorities of up to 10 % of the worldwide turnover of the undertakings concerned. The BCA can also impose fines of up to 10,000 EUR on individuals who have participated in the infringement. The BCA’s power to also punish physical persons has existed since 2013, but has so far never been used. In the pending case concerning the subsidies for the distribution of newspaper and magazines, in which a decision is expected by the end of 2024/beginning of 2025, the prosecutor general announced that physical persons are also being prosecuted. Undertakings and persons participating in bid rigging practices may moreover also face penalties under public procurement rules, criminal law, possible exclusion from future public tenders, and damages claims brought by the public authorities that issued the tender and from other undertakings that have suffered damages because of the illegal concertation.
Detection of Bid Rigging
Detecting bid rigging is a challenge for public authorities. They typically examine bidding patterns for signs of collusion, such as unusually high bids, the same companies consistently winning bids, or bids that are close in price.
In January 2017, the BCA published guidance to help procurement managers identify the warning signs of collusion, the market characteristics that could lead to bid rigging, and the best practices to follow in managing public procurement procedures.
In 2021, the European Commission also published a “Notice on tools to fight collusion in public procurement and guidance on how to apply the related exclusion ground”. This Notice not only provides guidance on how contracting authorities can detect collusion, but also focuses on the possibility of excluding companies involved in bid rigging, and on the possibilities for bidders to ‘self-clean’.
Leniency programmes have so far also proved to be very effective in uncovering collusion in public procurement, providing incentives for companies and individuals to come forward and cooperate with the competition authorities. The latest BCA bid rigging decisions have all been based on leniency applications of undertakings (and persons) that had been part of the illegal practices.
Recent BCA Decisions
- ANSUL/SOMATIE FIE and SICLI Groups in the Fire Protection Sector– Press Release & Decision
On 8 July 2024, the BCA determined that ANSUL, SOMATIE FIE and SICLI, major players in the fire protection industry, had engaged in bid rigging activities over seven years and violated Belgian and EU competition law. The activities mainly concerned the sale, rental and maintenance of fire extinguishers and hose reels.
The companies manipulated public procurement procedures by allocating public contracts among themselves to each retain their legacy customers in Belgium. They used tactics such as submitting “cover” bids – deliberately overpriced bids designed to ensure that a particular company would win the contract. The aim was to retain certain public customers for public contracts put out to public tender or negotiated without publicity, by refraining from competing with each other.
The practices were especially concerning given the essential nature of the products and the vulnerability of the customers involved, such as schools, municipalities, social housing, and public transport companies.
The ANSUL/SOMATIE FRIE group reported the cartel under the BCA’s leniency programme and was granted immunity from fines. The SICLI group, which cooperated in the investigation, received a 50% reduction in fines, resulting in a fine of €2.2 million. Six individuals were also granted immunity from prosecution. In addition and unusually, ANSUL/SOMATIE FIE formally undertook to compensate the defrauded customers, in accordance with a compensation protocol attached to the decision, which further demonstrated its recognition of the wrongdoing and for which it was granted an additional 5% fine reduction.
- Securitas, G4S, and Series in the Private Security Sector – link
On 3 July 2024, the BCA imposed fines totaling over €47 million on Securitas, G4S and Seris for their involvement in a complex cartel that operated from 2008 to 2020. The cartel members engaged in several anti-competitive practices regarding public procurement procedures, including coordinating their bidding intentions for certain procedures and ensuring that certain contracts would remain in the hands of certain suppliers, agreeing on minimum hourly tariffs for their security services and agreeing not to poach each other’s employees.
The leniency programme also had an important impact in this case too. Securitas did not receive any fine as it obtained immunity from fines and G4S and Seris also benefited from fine reductions under the leniency programme. All parties also received a further reduction from fines as they decided to settle the case. 11 individuals obtained immunity from prosecution, and one person is still being prosecuted in the US. In the decision’s press release, the BCA’s Prosecutor General, Damien Gerard, reiterated that prosecuting bid rigging practices is a top priority for the BCA.
Conclusion and outlook
The BCA’s renewed focus on bid rigging marks a significant shift in competition law enforcement; the penalties for both undertakings and individuals are increasing. It should be noted that in all bid rigging cases involving practices from before 2019 the BCA could only impose fines of up to 10% of the Belgian turnover of the infringers. Since 2019, the BCA is empowered to impose fines of up to 10% of the worldwide consolidated turnover of the undertakings involved, which will no doubt lead to an increase in the amounts of fines. Moreover, the BCA also announced it will no longer refrain from using its powers to prosecute individuals.
More decisions punishing bid rigging are expected, with the announcement of a decision on the bid rigging relating to the subsidies of the distribution of newspapers and magazines in the coming months and the dawn raids carried out on several companies active in the supply of bus and coach passenger transport services suspected of bid rigging in September 2024.
Companies must now adopt a proactive stance on compliance, incorporating comprehensive training, robust internal report mechanisms, through documentation practices, and advanced bid management systems. Significant legal questions also arise when forming a consortium bid with competitors where it is crucial to verify and ensure that collaboration can be objectively justified and is confined solely to the current bid.
For businesses contemplating leniency applications, consulting legal counsel is essential to effectively navigate the leniency programme. Legal advice also remains crucial about whether a company is undergoing a self-cleaning process or suspects competitors of engaging in bid rigging. Ultimately, while the BCA represents an important first step in tackling bid rigging, companies should also be prepared for potential damages claims in the courts.
In the current public procurement environment, robust compliance and strategic legal planning are the best bids for success.
